Saturday, August 25, 2018

The Cryptocurrency Bust

Cryptocurrencies are down about 75% from the beginning of the year.  See  Many investors have taken losses in the range of 70% to 90%.  Those who borrowed to buy cryptocurrencies learned the hard way that investments may or may not work out, but debts have to be repaid either way.  There may be some winners, but clearly there are plenty of losers.

The problem with cryptocurrencies is that they basically have no intrinsic value.  They're only worth what someone else will pay for them.  If buyer interest falls, people holding cryptocurrencies end up holding the bag.  If you want to buy cryptocurrencies, that's your choice.  But understand it's a speculative choice and lots of speculations end badly. 

The reason why stocks, bonds, real estate and a few other things have stood the test of time as good investments is they generally have underlying value.  If you want to build wealth, invest in value.  If you want to speculate, hope to win but don't be surprised if you lose.  If you want a decent retirement, avoid wishful thinking and focus on the higher percentage plays.  See

Sunday, August 5, 2018

To Manage Your Money, Manage Your Emotions

Building up your wealth is simple:  spend less than you get.  But it's hard for many people even though it's simple.  Put a little money in their hands and it's gone as quick as a flash.  Put a lot of money in their hands and it's gone quicker than a flash.  This is no way to get rich.  If you spend everything you get, how will you put together a down payment for a house, college costs for your kid(s), or retirement?  Sometimes, you can borrow.  But loans have to be repaid, so you'll enrich banks, not yourself.  Retirement on just Social Security can be okay--if you move to Panama or Cambodia, places where your only option may be McDonald's if you want a taste of America.

Controlling your spending is the first and most important step to building wealth.  Don't begin by reading the vast array of materials that discuss how to invest.  It doesn't matter how you make money investing in ETFs, mutual funds, S&P 500 futures contracts, or covered stock options if you don't have any capital to invest. 

First, learn how to save.  This means getting control over your emotions.  Learn how to deny yourself immediate gratification.  Learn how to value long term rewards.  Learn how to ignore the latest trends.  Learn that keeping up with the neighbors could mean you're just as foolish as the neighbors.  Aside from basic spending for food, shelter, clothing and transportation,  essentially all spending decisions are driven by emotion.  The latest smart phone?  Designer clothes and accessories?  The trendiest restaurant?  A luxury nameplate on your car?  An extra 500 square feet in your house?   These things are marketed to people with impulse control problems.  Status won't give you a comfortable retirement.  You need money for that.

You've probably seen the news stories reporting that half of all Americans have no retirement savings and most of the rest don't have very much.  How could this be when America is one of the wealthiest nations in the world?  The hard truth is most people don't have the emotional composition to get rich.  And they don't have the willpower to get control over their emotions enough to begin the process of saving.  Sure, an illness or layoff can wreck your financial plans.  But they're not an excuse not to try.  If you don't try, you'll fail for sure.  Those who try actually succeed in many cases.  Give yourself a chance.  Get control over your spending impulses and save.  The only people who laugh all the way to the bank are people who have money to deposit in the bank. 

For more, see (a); (b); (c); (d); (e); and (f)